Centre for Public Policy Research (CPPR) is a think tank dedicated to intensive research on economic, social, and political issues.

Wednesday, June 27, 2007

Today kerala witnessed the closure strike by members of the merchant association opposing the retail entry of the private companies. in this context this article found to be very interesting;

Sunil Jain: Making organised retail work

RATIONAL EXPECTATIONS

Sunil Jain / New Delhi June 25, 2007

While the government has begun work on implementing the CPI(M)’s proposal to restrict the spread of organised retail in the country by strict licensing norms which go back to the old licence-permit-raj days (June 19: No idea left behind), the retail industry itself appears in more than a bit of a mess. French retailer Carrefour, which is among the biggest in the world, and was supposed to be coming into the country within “two to three weeks” (to quote Commerce Minister Kamal Nath) in February, has postponed its India plans indefinitely given the political uncertainties associated with large retail. ITC, similarly, plans to wait it out for the next six months, according to a statement in the Press by S Sivakumar, the CEO of ITC’s agri-business division, and probably won’t set up its Choupal Fresh stores this year in several cities it had planned to earlier.

Among the others, Bharti Wal-Mart is now talking about opening its stores towards the middle of next year, a delay of 8-10 months already from what earlier reported launch dates were, and Reliance’s plans appear in a flux as well. While the company had talked of setting up nearly 1,000 (2,000-5,000 sq ft) stores by March 2007, it has achieved just 15-20 per cent of its target.

The government is still hopeful that the few players who are already in will slowly transform the country’s retail sector. That once they start sourcing cheaper fruits and vegetables, they will win over the common man; and once they set up linkages with farmers and assure them higher prices through reduction in the number of middlemen and in the 20-25 per cent wastage that takes place today in most staples and unprocessed fruits and vegetables, they will win them over as well. In other words, the pace may be slower than the government initially wanted, but if it delivers the goods, what’s the problem?

Theoretically, that’s a sound proposition, but it won’t work, for the same reason that small increases in an aeroplane’s power don’t help it take off until it reaches a critical minimum level. In the retail context, the amount of work, and investment, required to develop the supply chain is too big for any single player, and until this supply chain is built up fully, even the single player cannot do well. In other countries, specialised supply chains do this work, leaving the retailers to concentrate just on setting up their shops and selling things, but such specialised players will not come into the country until there are enough retailers who can be their clients. According to Arvind Singhal of retail consulting firm Technopak, some years ago, Snowman Foods tried to set up specialised supply chain services along with Mitsubishi, but had to shut shop as there weren’t enough retail firms doing good business.

Some numbers should help make this clearer, as well as clarify the extent of the loss by not allowing organised retail to take off. According to a recent report by credit rating firm Crisil’s research arm, the total market for staples and unprocessed fruits and vegetables is around Rs 4.7 trillion, or about $115 bn. And on this base, thanks to huge wastages and high storage costs and commissions to various middlemen, according to Crisil, there is an annual loss of Rs 1 trillion, or around $24 bn. Since farmers earn around Rs 1.8 trillion, or $44 bn, from food grains and fresh grocery, Crisil tries to estimate what they would earn if wastage levels fell dramatically thanks to organised retailing and if, once the number of middlemen declined, they got higher margins. This would increase farm incomes to Rs 2.5 trillion, or by around 37 per cent.

So, can a handful of organised retailers, growing at a curtailed pace, achieve these savings? Clearly not. To achieve the cost savings of $24 bn, organised retailers will have to capture the entire sales of around $115 bn. Which means, given a rule of thumb sales-to-investment ratio of around 3.5, organised retailers will need to invest around $33 bn in just this end of the business. Given that, say, a Reliance plans to invest a total of $6bn, of which just around $1.5-2 bn will be in the foodgrains and fresh grocery business, it is obvious its efforts will be minuscule compared to what is required.

If the maths is too complicated, here’s a simpler text explanation: In order to appeal to customers, Reliance Fresh needs to get foodgrains and fruits and vegetables from various parts of the country. Since the company only has access to just so much capital, and in so much time, it will naturally choose to put up its cold chain network only in some parts of the country. Let’s assume this is north India, for the moment. Which means that, if the company needs to bring in some goods from other parts of the country, it will not be able to do so as it does not have a cold chain there. And if it does bring in food from other areas, it won’t be as fresh, or cheap. And, over a period of time, customers will move away.

If the government is serious about improving the lot of farmers, it is obvious it has to develop organised retail. And it is equally obvious that just one or two chains will not do the trick, an entire retail eco-system will have to be created. If not, get prepared to hear India’s retail giants announce further rollbacks in their ambitious plans.

Friday, June 01, 2007

Bringing information closer to the public and extending the scope of e-governance, the Chief Information Commission proposes to accept applications for information online, and put all information that comes under the purview of the RTI Act online

The landmark Right to Information (RTI) Act, 2005, is all set to take its next big step -- it will now be accessible on the Internet. Soon, applications for information under the Act can be made by email, and all government information that comes under the purview of the Act will be put up on the worldwide web.

The Central Information Commission, the nodal agency for administering the RTI Act, will ask all government departments to begin accepting applications for information from citizens via email.

Applications can be sent in by email and the fee of Rs 10 sent through postal order whose number will be in the email. First and second appeals can be sent in scanned, via email, said Chief Information Commissioner Wajahat Habibullah. He added that instructions would be sent out to all departments in a few days. “These are only recommendatory instructions, but departments usually follow them.”

The plan to completely computerise the government’s information was devised jointly by Habibullah and officials of the National Informatics Centre. It was sent to the prime minister last month for his approval. It has also been proposed that government-related information of any kind that can be shared with citizens -- possibly tens of millions of pages -- be put up on the Net.

If these proposals are accepted, citizens can look forward to seeking information from the government from their homes, and paying for the service online through their credit cards. “We may also have facilities for online payments later, though it is not being planned right now.” Besides improving ease in access, the idea is also to make the process of providing information less unwieldy.

In January this year, Bihar took the lead in launching a similar innovation in the filing of RTI applications -– citizens can make a phone call to a call centre where they can put in their request for information under the Act. The fee will be added to their telephone bill.

The Right to Information Act, implemented in 2005, enables all citizens to seek any information from the government, with some restrictions on information related to national security and privacy concerns. But while the Act has been widely praised for increasing transparency in governance, its implementation has been tedious.

“The process of filing an RTI application is very cumbersome. People don’t understand governance, they do not know which department handles what -- or how to deposit money, and in whose name,” says RTI campaigner Arvind Kejriwal.